There has been much written about the credit crunch. There can be no doubting that this has been a very challenging time for small businesses and many have not managed to survive the current economic downturn. Many firms that have continued to trade are only breaking even, or trading at a loss.

Whilst this climate has many negative implications, there have been some positives too. Many owner managed businesses who have not had the resources to allocate to every area of their business (which they have previously overlooked) are being forced to ensure that every area of their business is now being given sufficient attention:

Staff

In the past, many owner managed businesses who have not had previous management experience have not fully utilised their workforce, or have not fully managed their staff. Idle time has been tolerated, staff have not been fully motivated, and insufficient attention has been given to lowest cost allocation of resources. Sub standard performance has previously been accepted by some.

This is no longer the case. Business owners now have no alternative than to ensure that they are getting the most out of their most vital asset – their people.

Suppliers

As with staff, in many cases suppliers have previously been chosen out of habit when such suppliers are no longer competitive on price or service.

Business owners are now increasingly regulary reviewing the value they receive from their suppliers, and switching if it makes good business sense.

Clients

Firms are now increasingly doing what should be second nature – going the extra mile for their clients in order to retain their business and to generate exceptional referral rates.

Marketing

More and more small businesses are investing in lower cost but more effective marketing, rather than the previous popular method of advertising and waiting for the ‘phone to ring.

Costs

Many firms previously used to look at increasing turnover without looking at their costs. The credit crunch has taught business owners that cost review and analysis is every bit as important as increasing sales, if not more so.

Credit Management

Non or late payment of invoices has been the reason that many firms have gone under of late, despite their business being profitable.

Firms are now wising up in this area, and are implementing credit management policies, researching new clients, setting credit limits, and chasing payment much more pro-actively.

Profit retention

The smarter firms have always kept reserve levels, though other firms are learning the hard way that in business, there are bad times as well as good and some funds should always be retained for a rainy day.

Summary

The above shows only a few areas in which business owners have had to review and act on very quickly, sometimes making unpopular decisions that they may have shied away from previously.

For all of the downsides of the recession, it can also be viewed as an invaluable lesson in business, albeit a very expensive one!

Firms that ensure that they continue to put into practice what they have learned in this period could be well placed to prosper when the economy recovers.